The Coffee Shop Indicator

Stocks are currently trading at roughly a Brazilian times earnings.

Which puts me in mind of a simple truth: the top tends to be in right about the time poorly informed people start handing out stock tips. Because, you know. Stonks. And stocks only go up.

Picture 2018. Crypto was arguably running even hotter than today, and for those who remember, this was right before the big drop and the crypto winter that followed.

I was sitting in a coffee shop. Coffee’ing. Cake’ing. Reading a good book.

Now, when you have spent a lifetime trading, you can hear a market conversation or spot an open chart at twenty paces. This particular day was no exception. My Bull and Bear senses started tingling, hairs on the back of my neck standing up like a meerkat on lookout.

I looked up. One young chap was giving another what he clearly believed was a compelling, convincing case for being bullish on crypto. The only things missing were a PowerPoint and a laser pointer.

Chuckling, I tried to get my nose back into my book.

But my ears were already picking up a second crypto conversation.

Now I was curious. Book down. Reading the room properly. And there it was, a third conversation. There may have been more. Probably were.

Three crypto conversations on the tables one or two over from mine. What are the chances?

And in my best Morgan Freeman voice: it was at that moment he knew the top was in.

Less than ten days later, crypto gave the world a jolly good kick in the shins. Traders, accidental long term holders, the lot of them. Cue the crypto winter. Boohoo. Very sad.

The point, if there is one: when people who really should not be offering market advice start offering it, or your taxi driver has a cracking stock tip, that is your cue to about face and walk quietly the other way. Ideally in slow motion, with explosions going off in the background.

So tell me. How many coffee shop traders have you heard lately?

PopPop 🏴‍☠️